Question

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6.4 million. The machinery can be sold to the Romulans today for $4.2 million. Klingon's current balance sheet shows net fixed assets of $2.95 million, current liabilities of $2.2 million, and net working capital of $540,000. If all the current assets were liquidated today, the company would receive $1.55 million cash.

Answer 1

Solution :- Book value of current assets = Book value of current liabilities + Net working capital.

= 2200000 + 540000

= $ 2740000.

Book value of net fixed assets = $ 2950000.

Book value of all assets of Klingon Widgets Inc. = Book value of net fixed assets + Book value of current assets.

= 2950000 + 2740000

= $ 5690000.

Market value of current assets = $ 1550000.

Market value of net fixed assets = $ 4200000.

Market value of all assets of Klingon Widgets Inc. = Market value of net fixed assets + Market value of current assets.

= 4200000 + 1550000.

= $ 5750000.

Conclusion :-

Book value of all assets of Klingon Widgets Inc.	$ 5690000.
Market value of all assets of Klingon Widgets Inc.	$ 5750000.